The Treasury Department warned Monday that unregulated cryptocurrencies could pose risks to the U.S. financial system.
The warning was part of the first major public report released on digital assets by the Treasury Department’s Financial Stability Oversight Committee. The council identified digital or “crypto” assets such as stablecoins and lending and borrowing on industry trading platforms as “significant new vulnerabilities.”
Treasury Secretary Janet Yellen said, “The report concludes that cryptocurrency activity may pose a risk to the stability of the U.S. financial system, and the need for appropriate regulation, including enforcement of existing laws, is critical.” “It is imperative that government stakeholders work together to advance these recommendations.”
The council first designated digital assets as a priority area in February.
US Treasury Secretary Janet Yellen speaking at the Atlantic Festival on September 22, 2022 in Washington, DC.
Kevin Deitch | Getty Images
According to the report, the global cryptocurrency market capitalization peaked at around $3 trillion last November, accounting for around 1% of global financial assets. The report found that while the impact on the larger global financial system is relatively small, digital finance has become ubiquitous and manipulated by criminals for illicit gain.
Earlier this year, the Treasury Department issued a series of sanctions against Russian oligarchs, certain Russian banks, and other organizations for using cryptocurrencies to evade sanctions. In September, authorities blocked all property owned or controlled by Americans for 22 of her individuals and two of her entities that helped digitally finance Russia’s invasion of Ukraine.
Stablecoins, a type of cryptocurrency popular in the forex market, are also being used overwhelmingly in speculative cryptocurrency trading, said Rohit Chopra, director of the Consumer Financial Protection Bureau, on Monday. said at the FSOC meeting. Created for price stability, stablecoin prices are linked to flat currencies, commodities, or other crypto assets.
The group proposes legislation to allow financial regulators to more actively monitor the industry, expands bank inspections, and encourages federal and state agencies to consider services offered by crypto-services firms. requested.
Established after the 2008-2009 financial crisis, the FSOC identifies emerging threats to the nation’s financial security and organizes a coordinated response across U.S. financial regulators. Under the Dodd-Frank Act, the FSOC is empowered to supervise and regulate nonbank financial companies, financial markets utilities, payment, clearing or settlement activities to address potential vulnerabilities to financial stability. I’m here.
To date, the report says the FSOC has not used this power to regulate the cryptocurrency market.
